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The introduction of Goods and Services Tax (GST) in India in 2017 has had a significant impact on the gold and gold jewellery industry. Prior to GST, gold was subject to multiple taxes, including excise duty, value-added tax (VAT), and customs duty. However, with the implementation of GST, all these taxes were replaced with a single tax, which led to a change in the pricing of gold and gold jewellery.
The GST rate for gold and gold jewellery is currently set at 3%, which has resulted in a slight increase in the price of these products. The impact of GST on the gold industry has been felt across the entire supply chain, from mining and refining to retail sales. Overall, the impact of GST in gold and gold jewellery has been a crucial factor in shaping the industry since its implementation.
Goods and Services Tax (GST) on gold is a single tax levied on the purchase and sale of gold in India. According to the GST law, gold bars and gold jewellery are considered “goods”. The supply of gold (without any job work) is regarded as the provision of goods under section 7 of the CGST Act. The current GST rate on gold is 3%, which is applicable to all types of gold, including bullion, jewellery, and coins.
The GST rate on gold jewellery is calculated based on the value of the gold, including the making charges and any other taxes applicable to the product. Businesses that deal with gold, such as miners, refiners, and retailers, must comply with the GST regulations and charge the appropriate tax on the products they sell. The implementation of GST on gold in India has led to a more transparent and streamlined tax system, which has benefited both businesses and consumers in the gold industry. GST is as follows for gold:
| Particulars | HSN Code | GST Rate |
|---|---|---|
| Semi-precious stones and precious stones, except diamonds, whether or not worked or graded but not mounted, strung, or setSemi-precious and valuable stones that have not been graded and are now stung for travel convenience (includes synthetic or reconstructed stones, apart from unworked or simply sawn or roughly shaped) | 7103,7104 | 0.25% |
| Silver, gold, pearl, diamonds, or other jewellery made of these materials, as well as artificial or man-made stones that have been rough-shaped or simply sawn, are all acceptable. | 7101, 7102,7106, 71707, 7108, 7109, 7111, 7113, 7114, 7116, 7118 | 3% |
| Work involving polished and cut diamonds, plain or adorned gold, silver, and other jewellery | 9988 | 1.5% |
Selling gold jewellery or ornaments to the general public is considered a composite supply of goods and services under section 8 of the CGST Act. Making changes or adding value is done in relation to job work, and the gold utilised is regarded as good. The GST rate of 3 % instead of 5% shall be applied to the total value of the jewellery, whether or not making charges are listed separately, as the sale of gold is the primary supplier.
The CBIC has clarified this in its sectoral FAQs on what is the GST on gold, including GST on the gold rate. A business engaged in gold distribution and mining is subject to the same GST registration threshold limit as a regular taxpayer. Additionally, companies that sell gold have access to the composition system provided for in section 10 of the CGST Act.
Many gold dealers, sellers, and jewellers use the service of goldsmiths and specialists to create jewellery using gold bars or gold biscuits they provide. Its qualities as a supply of services Goldsmiths will charge for their “Making charges”, which will be subject to a 5% GST. If these goldsmiths or experts are not GST registered, the gold merchant or jeweller must pay GST at 5% on a reverse charge basis.
If the goldsmith is registered for GST, customers who visit them on their own will also be required to pay 5% GST. If unregistered persons swap gold ornaments for new ones at jewellery stores or sell gold jewellery, no GST is applied. It is not regarded as an expansion of the firm and is not a supply subject to GST. However, when dealers or gold firms like Attica Gold Company, Aashraya Gold Company, or Manappuram Gold Loan, among others, buy and sell used gold jewellery, GST is applied to the value of the gold after meeting the requirements in rule 32(5) of the CGST Rules.
Jewellery repairs will be regarded as jewellery-making costs. For which GST is levied separately at 5%.
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The price includes the cost of mining and processing the gold, as well as the profit margin, but does not include making fees when computing GST for gold jewellery, GST on gold ornaments, GST on gold biscuits, GST on gold bars, or GST on gold purchases. But adding fees to the cost of gold jewellery is also necessary. Taxes, including VAT and service tax, were charged on its price up until June 30, 2017. GST took its place after that.
Let’s examine the pricing of imported gold jewellery under the pre-GST and post-GST regimes and learn what pre-GST and post-GST mean for gold by using the following example.
| Particulars | Before GST | Under GST (Not as a composite Supply) | Under GST (As a composite supply) |
|---|---|---|---|
| Base Price of 10 gm Gold (assumed) | 1,00,000 | 1,00,000 | 1,00,000 |
| Add: Basic Customs Duty (10%) | 10,000 | 10,000* | 10,000* |
| Assessable value For Service Tax | 1,10,000 | 1,10,000 | 1,10,000 |
| Add: Service Tax (1%) | 1,100 | Nil | Nil |
| Assessable value for VAT | 1,11, 000 | 1,11, 000 | 1,11, 000 |
| Add: VAT (1%**) | 1,111 | Nil | Nil |
| Assessable Value For GST | 1,12,111 | 1,10,000 | 1,10,000 |
| Add: GST on gold at 3 % | Nil | 3,300 | – |
| The Total value of gold | 1,12,111 | 1,13,300 | 1,10,000 |
| Add: Making charges at 10%^ (On base price +customs duty) | 5,500 | 5,500 | 5,500 |
| Assessable Value For GST | 1,17,611 | 1,18,800 | 1,15,500 |
| Add: GST On Making Chargers At 5% | Nil | 275 | Nil |
| Add: GST On Gold Jewellery | – | – | 3465 |
| Total Value Of Gold Jewellery | 1,17,611 | 1,19,075 | 1,18,965 |
As a composite supply, the comparison between “before GST” and “under GST” shows that prices increased by Rs. 1354 or around 1.1% after GST. The price increase is due to the GST’s increase in the tax rate on pure gold or gold bars from 2% to 3%.
Additionally, the making charges are now subject to GST, which was not previously a part of the previous indirect tax system. These elements have influenced the price increase.
The custom charge on imported gold bars from outside India was also raised in the 2019 budget. Compared to the former rate of 10%, it is 12.5%.
Influence on Gold Import
GST has streamlined the gold import process by applying a uniform tax of 3% on gold imports. Before GST, taxes varied from state to state, creating complications for importers. With a consistent tax structure, tracking and managing gold imports has become easier.
However, the overall cost of imported gold has slightly increased due to GST, which has led to a small rise in gold prices for consumers. Additionally, GST helps reduce illegal gold imports, as the new system promotes transparency and proper documentation of gold transactions across borders.
Influence on Ornaments
GST has directly impacted the gold jewellery industry by imposing a 3% tax on gold and a 5% GST on making charges. This tax structure has slightly increased the cost of gold ornaments for consumers. Before GST, various state taxes were applicable, but the new system offers a uniform rate across India.
While the price increase initially affected demand, customers have adjusted over time. Additionally, the GST system promotes more transparent transactions in the jewellery industry, as buyers now receive proper invoices, and jewellers need to comply with tax regulations.
Influence on Organised and Unorganised Sector
The GST regime has significantly affected both the organised and unorganised sectors of the gold industry. GST has streamlined compliance and tax filing for the organised sector, making the business environment more transparent and reducing tax evasion. However, the unorganised sector, which often relied on cash transactions, has struggled to adapt.
Many smaller jewellers found the compliance process challenging, and informal gold trading has been reduced. GST has helped bring more businesses into the formal economy, encouraging better accounting practices and creating a level playing field between organised and unorganised players.
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On December 22, 2018, the 31st GST council meeting declared a GST exemption. As a result, the notified agency does not charge GST for the supply of gold it makes to exporters of gold jewellery who have registered for GST. Under the Goods and Services Tax (GST) system in India, there are certain exemptions and concessions available for the gold industry. Firstly, gold that is imported into India is subject to a 10% customs duty, but this duty is exempted for gold imported for refining purposes.
Secondly, there is no GST on the sale of old gold jewellery by individuals to jewellers, as this is considered a second-hand transaction. Gold sold to banks or other financial institutions is also exempted from GST, as it is considered an investment in gold. Finally, there is a concessional GST rate of 1.5% applicable to the supply of gold by nominated agencies to registered persons under a scheme known as the “Gold Monetisation Scheme”. These exemptions and concessions have been put in place to encourage transparency and growth in the gold industry and to provide relief to consumers and businesses.
The decision has reduced the GST burden on Indian companies exporting gold jewellery and, presumably, increased the competitiveness of Indian gold exports on the global market. Domestic gold jewellery buyers are unaffected, though.
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Things to Consider Before Buying Gold Ornaments
Prior to September 13, according to CGST Rule 138(14), an e-way bill was not necessary when shipping gold in any form, including jewellery, goldsmiths craft and articles (chapter 71). Therefore, gold can be transported without an e-way bill, regardless of whether the seller or recipient is registered under GST.
The NIC has established a separate window for creating e-way bills for carrying gold, gold jewellery, or precious stones as of September 13, 2022, per the announcement made by the relevant states.
Input tax credit (ITC) paid on the raw material utilised, i.e. gold and other job work expenses incurred can be claimed by the jeweller or gold merchant. The gold dealer can still claim the ITC on taxes paid on a reverse charge basis for supplies from unregistered job workers.
Matter/Issue:acc
The prospective gold corporation offers spot payments for gold and releases the pledged metal at the GST-registered current market rate. If there is no change in the nature or quality of items while buying gold from unregistered individuals, then:
Ruling:
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Matter/Issue:
The applicant company sells hybrid seeds and crop protection products. It began a sales incentive campaign called the 2018 Khari Gold Scheme. Simply put, the programme rewards clients with 10 gm and 8gm gold coins for purchases above a particular threshold and for completing minimum payments, respectively. The issue is as follows.
Rulings:
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